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Troubled by the ‘European Whale’

The rhetoric of William Hague, the UK’s foreign minister, as he announced a “comprehensive audit of Britain’s relationship with Europe” reminded me of the pledge made a fortnight earlier in Washington, DC by Jamie Dimon, the chairman of JP Morgan, to investigate thoroughly a $4.4 billion (€3.6bn) loss sustained by his bank’s UK subsidiary, known to commentators as the “London Whale”.

The “European Whale” has long troubled the Captain Ahabs of the UK’s Conservative Party and they are as unimpressed by Hague as JP Morgan’s shareholders were by Dimon. The coalition government’s policy towards the EU has placed the UK in a no-win situation. If the euro breaks up, the economic damage for us would be immense. But if the present dynamic towards closer regulatory and fiscal integration succeeds, we will be faced with the political decision that we have evaded ever since we signed the Treaty of Rome: to accept the goal of “ever closer union” or leave.

Hague’s plan did not alter Prime Minister David Cameron’s latest extension of this evasion, announced the previous Sunday, when he confirmed his opposition to an “in or out” referendum on the UK’s membership of the Union, while reiterating his desire to support some unspecified, looser relationship to be negotiated and put to a plebiscite after the next general election. Bizarrely, this imitates the tactics of Alex Salmond, Scotland’s first minister and Nationalist leader. Like him, the Euro-sceptics seem to fear the only proper question for the people to decide. Instead, they hope to achieve their goal of “independence from Europe” by first achieving ‘devo max’ on a rag-bag shopping list that extends from the European Social Chapter to fishing policy. This exempts them from any obligation to spell out their alternative vision of the UK’s future. Rather than the national interest, it serves only the continuation of the coalition.

How long can this rococo pantomime last? Everything depends on the outcome of the great battle under way to preserve the single currency. The UK is irrelevant to this. Certainly, more could be done to reduce our deficits, which remain horrendous. But essentially our fate is not in our hands. The key may be that the withdrawalists in the Conservative Party, and among their more honest auxiliaries in the UK Independence Party, now feel time is against them. The survival of the euro, with all that would entail, remains overwhelmingly the most likely outcome of the current crisis. This, whenever it becomes clear, perhaps after the next German elections, must weaken them. It is therefore possible that some attempt may be made to remove Cameron, break the coalition and precipitate an early general election on a strongly anti-European ticket as the only strategy likely to secure a Conservative majority.

The absence of a plausible replacement prime minister makes such a move problematic, though both Michael Gove, the education minister, and Philip Hammond, the defence minister, aspire to the role. Its likely consequences in the markets, however, must surely be the decisive brake. The euro’s travails have diverted attention away from our troubles, especially those of our leading industry: finance. Dimon denied to the Senate Banking Committee that JP Morgan’s dysfunctional City of London operation required a re-think of the entire strategy that his institution has pursued for a generation. His audience’s disbelief, however, and above all their hostility to London as an international financial centre, was palpable, unprecedented and deeply ominous. This alone should prompt the coalition to drop its shameful denial: the dysfunctional British relationship with the EU requires a confrontation with the evasions and illusions in our national strategy of the past two generations. In other words, we need a real audit.

John Stevens is a former Conservative member of the European Parliament and stood as an independent candidate in the last UK general election.